BHP Billiton raised its full-year guidance for iron ore output yesterday after a strong nine-month performance from its Australian operations.
The global mining firm’s operational review for the nine months to March showed a strong operating performance, especially for iron ore and metallurgical coal. This comes as the company has disinvested from South Africa as part of a plan to simplify its business and focus on core commodities.
Iron ore output reached a record level of 147 million tons, a 21 percent increase, and guidance was boosted to 217 million tons for the full year to June from its previous guidance of 212 million tons.
This is despite a moderation in economic growth in China, where annual expansion slowed to 7.4 percent in the first quarter. China is the biggest consumer of iron ore, a steel-making ingredient that is a key input for its industrialisation drive and in property and infrastructure development.
“BHP Billiton’s iron ore operations are at the low end of the cost curve and it has always been its strategy to drive low cost volume growth,” Rubin Renecke, an investment analyst at Kagiso Asset Management, said. “The slowdown in China will impact the demand and the price of the commodity, but BHP Billiton will still be able to supply volumes profitably, given its position on the cost curve.”
The company also posted record metallurgical coal output of 33 million tons, a 24 percent increase. It increased the full-year production guidance for the steel-making fuel by 2.5 million to 43.5 million tons.
Manganese ore production for the nine months to March dropped 4 percent to 6 million tons. The decrease was attributed to higher-than-usual rainfall at Gemco, which had an impact on feed rates and yields, and planned maintenance in South Africa, which led to an 18 percent decline in production in the quarter to March.
Petroleum liquids production rose by 16 percent to 77 million barrels of oil equivalent for the nine months to March, underpinned by a 71 percent increase in onshore US output, the company said.
“Our productivity agenda continues to deliver outstanding results, underpinning a 10 percent increase in production so far this year. Having achieved record iron ore and metallurgical coal production during the first nine months of this year, we have raised full-year guidance for both commodities,” chief executive Andrew Mackenzie said.
Copper production guidance remained unchanged at 1.7 million tons, and a strong June quarter was expected. In the three months to March, copper output was up 2 percent at 413 900 tons.
In South Africa, BHP Billiton has entered into talks with stakeholders on halting aluminium smelting at its Bayside operation in Richards Bay. The Bayside aluminium smelter employs 450 people and has an annual capacity of 97 000 tons.
BHP Billiton said energy coal production of 55 million tons for the nine months was broadly unchanged. Zinc and uranium output was also flat.
The shares rose 1.14 percent to R338.35 on the JSE yesterday.